Cross-Border Distribution of UCITS

A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2011

FUND DISTRIBUTION MODELS & PLAYERS

2.

FUND DISTRIBUTION MODELS & PLAYERS

2.1

The CSD and TA models

In some European domestic fund markets such as Belgium and Italy, cross-border fund mar- kets such as Luxembourg and Ireland, and Asian domestic fund markets, orders and settlement are typically handled through bilateral arrangements between the distributors/aggregators and the fund-side institutions: Registrars and transfer agents (TA) which is known as the TA model. Whilst in other domestic fund markets such as France, Germany and Switzerland, the order and settlement infrastructure is provided almost totally by Central Security Depositaries (CSDs) which is known as the CSD model. CSDs’ offers however differ from one another in terms of specific aspects of fund transaction services from order execution through to settlement and custody of the fund’s units/shares. However, it is important to note that in cross-border fund markets, the two models may coexist through the use of an International Central Security Depositary (ICSD) such as Clearstream or Euroclear.

2.1

Due to the complexity of the subject, in the following section, this paper focuses its analysis on two fund distribution models, the French CSD model and the Luxembourg TA model.

2.1.1

The CSD model: The French example

Graph 18 displays the generic model of players involved in France’s fund distribution industry.

Graph 18: The French CSD model

Investors

Fund Management Company

Distributor

Centralising Agent

Financial Intermediary

Issuer account keeper (gestionnaire du passif)

Distributor’s Custodian (CSD Member)

Fund’s Custodian (CSD Member)

CSD (Euroclear France)

Source: CACEIS, 2011

There are 2 main characteristics of fund order processing in France: • Funds must appoint a centralising agent to handle the receipt and execution of subscrip- tion and redemption orders in the name of and on behalf of the fund, • Fund’s shares/units in Euroclear France (the French CSD) are bearer securities, which means that the identity of the final beneficiary is unknown to the centralising agent. There is no register of shareholders in a fund as this is the case elsewhere in Europe. Instead,

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